Colorado Republicans and Democrats are divided on a complex tax proposition that aims to reduce residential and small business property taxes for the next decade that will be presented to voters on the November ballot.
Democratic Rep. Mike Weissman, one of four sponsors of Proposition HH, said the measure stands to save taxpayers a net $1.5 billion just two years into the 10-year proposal, which was drafted to lower property taxes by reducing assessment ratios for various properties and by slightly reducing property valuations.
Elected state officials from each party held separate virtual town halls Wednesday evening to discuss why they support or oppose Prop HH.
Democrats say the proposition, if approved by voters, would reduce property taxes at a time when wages are not keeping up with high inflation and rapidly rising property taxes. But Republicans say Prop HH won’t provide property tax relief and will inflate government spending in the years to come.
At the Democratic town hall featuring Weissman and Reps. Shannon Bird and Barbara McLachlan, Weissman said the proposition gives special consideration to primary residence property taxes by including slightly reduced tax rates that, when the reductions of millions of homes across the state are added up, equal huge aggregate property tax reductions.
Commercial assessment ratios would also be reduced, including for agricultural and renewable energy properties, he said. Farmers who want to generate additional revenue by implementing solar panels and wind turbines will have a lower assessment ratio on their property if they do so.
“We know farm economics are tough,” Weissman said. “We want to continue taking steps in renewable energy. This is one way we can try to incentivize both of those at the same time.”
Prop HH also considers seniors, renters and local government tax collection, and introduces new tax concepts to address the latter.
The measure introduces a concept called qualified “senior primary residence real property,” which allows seniors receiving a homestead benefit to move to a new primary household and continue receiving that benefit, Weissman said.
The homestead exemption currently allows for people 65 years old and older who have lived in their home for at least 10 years to have their property taxes reduced by filling out the proper paperwork with the county assessor’s office. But it doesn’t apply if a senior moves to a new household, he said. That would change under Prop HH.
He said the “senior primary residence real property” proposal could help “several hundred thousand people statewide” and save seniors $600 to $800 a month.
Two new tax concepts are introduced in Prop HH that Weissman called a “soft cap” and a “backfill,” which have to do with property tax collections by local governments and slow growth of certain counties and districts, respectively.
The soft cap limits property tax revenues collected by local governments to inflation, and the backfill mechanism allows the state to supplement local governments where property tax revenues decline because of Prop HH.
“Basically, going forward, again subject to voter approval, some levies – the ones that haven’t already been approved by voters – aren’t going to be able to go up more than inflation,” he said.
Certain exemptions are included in the proposal, namely for bonds already approved by voters and specific mill levies such as school district mill levies, he said. But a basic county mill levy would likely be impacted by the bill.
He said the idea is if a local government’s property tax collection were to increase more than inflation, Prop HH would require that government body engage its constituents. That means conducting public hearings, allowing public comment and recording a public vote if the local government wishes to retain excess revenues.
On backfill, he said Colorado is a diverse state where some areas experience fast growth and others have slow growth. Agricultural areas have lower property valuations, which means local governments aren’t collecting as much tax revenue. Metropolitan areas such as Denver County have a lot of commercial property and growth, which leads to significant property tax collections.
Should Prop HH pass, the state would set aside revenue yearly to backfill counties and districts that have slower growth. Fire and ambulance districts would receive more backfill funding because of essential services they provide, he said.
Additional money leftover after backfilling slower growing counties would be transferred to the state’s education fund, which supports public schools across the state, he said. But in order to do that, voters must approve an adjustment to how the TABOR (Taxpayer Bill of Rights) revenue limit is calculated.
TABOR is currently calculated by taking the prior fiscal year’s revenue limit and adding the rate of inflation plus population growth across the state, according to the Colorado Department of Revenue.
Under Prop HH, the TABOR revenue limit would be calculated by adding inflation and population growth to the prior fiscal year’s revenue limit, as well as adding 1%, Weissman said.
“That adjustment to the TABOR cap is how we make all of the rest of this balance out,” he said.
At the Republican virtual town hall that took place shortly after the Democratic meeting, Sen. Barbara Kirkmeyer and Rep. Rose Pugliese voiced their concerns about Prop HH. They said the proposition, if passed, still allows property taxes to rise for homeowners, and it is ultimately another attempt by the Democratic Party at eliminating TABOR.
Kirkmeyer said Prop HH, if passed, will grow the government by more than $10 billion and essentially eliminate TABOR refunds by 2027.
She said Democrats are billing Prop HH as property tax relief, but property taxes will still rise if the proposition passes.
“They will essentially dismantle TABOR and your refunds will essentially not exist within about four years from now,” she said. “Government spending will increase.”
cburney@durangoherald.com
